Donor-advised funds have long been seen as effective philanthropic vehicles administered by public charities. Here’s another way to look at these tax-preferred investment products that are designed to do good: an untapped pool of assets that is naturally aligned with the impact investing approach.

Using donor-advised funds is a logical way to accommodate investors and further the goals of aspiring impact investors who aren’t large-scale philanthropists or institutions with billions of dollars at their disposal. The 285,000 individual donor-advised funds nationwide already have more than $85 billion under management, according to the National Philanthropic trust.

ImpactAssets, RSF Social Finance and increasingly others have begun to tap the deep well of philanthropic resources for impact investing. More can be done.

Learning and benchmarking are key steps towards becoming an impact giver. If you are interested in giving with impact on Impact Investing take a look at these selections from Giving Compass.

Giving Compass' Take:
• Kris Putnam- Walkerly discusses the importance of strategic philanthropic investments that go beyond traditional market investments and provide capital that is mutually beneficial.
• What are some critical philanthropic investment strategies that are currently working well for donors? Who dominates this space right now?
• Read about the private equity investment model for philanthropy.
Socially conscious investors are after more than just financial returns. In addition to making money in the markets, we also want to make a difference. We want to leave a legacy of not just wealth but positive change. However, in our quest to be socially conscious change creators, we often overlook the power of one key asset: our philanthropy.
For most people, philanthropy is the money we give away when we’re finished investing and earning in other areas. It’s a separate category — not just on our tax returns or financial planning documents, but also in our heads. The idea that one makes money first, then gives it away is about as American as apple pie.
But smart investors realize that philanthropy is much more than charity. Philanthropy is an investment tool that can transform outcomes for ourselves and for the world.
Including philanthropic investments within an entire investment portfolio is what my friend and colleague Jed Emerson calls "investing for total return." One key to achieving total return is to think beyond the traditional market investments that are available and determine where mutually beneficial opportunities lie in the philanthropic arena.
A fashion designer with a passion for women’s issues might make a philanthropic investment in nonprofits that help train women entrepreneurs, some of whom might supply materials for future clothing lines. And a manufacturer with a passion for reforming the juvenile justice system might make philanthropic investments in nonprofits that help youth identify and follow paths into manufacturing-related careers — thus helping to ensure his own future qualified workforce.
As a rule, the return on philanthropic investment isn’t quantifiable in the same way as market returns. Our society doesn’t have a system for placing a dollar value on a life changed for the better. Perhaps that’s why philanthropy is so often forgotten as a part of one’s overall investment strategy.
Read the full article about philanthropic investment by Kris Putnam-Walkerly at LinkedIn.

Institutional-grade

Banks and other organizations are noting annual double-digit percentage jumps in the institutional assets dedicated to impact investing. On a smaller scale, we have seen similar increases in impact asset managers partnering with philanthropic individuals and families to amplify the impact of charitable donations held in donor advised funds. This presents a broader set of opportunities to educate the so-called “mass affluent” segment of the investing public about becoming impact investors.

Lower minimums

The people we’re talking about are wealthy enough to make meaningful charitable gifts, but aren’t putting millions of dollars into their own private foundations. Many of the funds furthering the broad objectives of impact investing require minimum commitments of $250,000 to $500,000.

Donors who’d like to channel philanthropic dollars into deep impact investment objectives can do so at much lower minimums at some donor-advised funds.

We hope with investments in donor-advised funds, people with limited capital, but dedicated interest in positive change, will be able to get involved in impact investing and continue doing good work. The urgent need for constant capital flows to address pressing global challenges like poverty and climate change shows no signs of abating.

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